On Tuesday 19 February 2019, the ACCC released its regular quarterly analysis of average petrol prices in Australia.
The report, discussing fuel prices during the financial quarter ending 31 December 2018 stated that “daily average prices peaked at 10-year highs of 159.9 cents per litre (cpl) in late-October 2018, before dramatically falling by more than 40.0 cpl to 119.2 cpl by the end of 2018”.
The ACCC went on to state that the key driver of petrol price volatility during the quarter was movement in international crude oil and refined petrol prices with prices peaking in October 2018 and then falling sharply during December 2018 due to concerns about global over supply.
The net result was that average petrol prices in Australia’s five major capital cities (Sydney, Melbourne, Brisbane, Perth and Adelaide) in December 2018 fell to 15-month lows.
Fuel prices in the smaller capital cities (i.e. Darwin, Hobart and Canberra) and Regional areas did not drop as rapidly, but the ACCC noted that all these locations continued to experience steady falls in average petrol prices during January 2019.
The fact that there is a longer lag in petrol price movements in the smaller capital cities and regional markets is pretty typical of lower volume markets, but the fact is that all of Australia has now benefited by the fall in international crude oil and refined product prices that occurred during the December quarter”, said ACAPMA CEO Mark McKenzie.
“Curiously, that does not appear to have stopped politicians in two of Australia’s smaller State/Territory markets from calling for greater scrutiny of our industry”, said Mark
Earlier this month, the ACT Opposition Leader and ACT Greens Leader called for a pubic inquiry into petrol prices in Canberra noting that they were the highest in the country. The calls were supported by several articles in the Territory’s main newspaper – the Canberra Times – with statements that Canberra had the highest average petrol prices in the Country.
This suggestion of highest capital city prices is likely to have come as a significant surprise to people living in Darwin and Hobart who, like Canberra, tend to experience high average petrol prices because of their market size and market structure.
“The evidence does not support the public claims made with Canberra’s average petrol prices being entirely consistent with the characteristics of the three smaller capital city markets that exist in Australia”, said Mark
“Nonetheless, the debate continued regardless of the facts and the ACT Chief Minister eventually bowed to the political pressure by calling an Inquiry into petrol prices in Canberra”, said Mark
The principal matters to be addressed by the ACT Legislative Inquiry into petrol prices have been listed as follows:
- fuel price methodology and key determinants;
- characteristics of the ACT fuel market, including historical changes;
- the impact of fuel prices on the ACT community;
- reasons for significant pricing discrepancies within the ACT and when compared to other Australian communities and capital cities;
- consideration of best practice approaches and initiatives in other jurisdictions which have a meaningful impact on reducing fuel prices; and
- regulatory and legislative solutions and barriers, particularly around competition and retail margin.
Submissions to the inquiry close on 11 March 2019 and the Committee is required to report to the Assembly by Thursday, 6 June 2019.
“ACAPMA has already met with a number of members of the ACT Legislative assembly in respect of petrol prices and will be providing a formal submission to the Inquiry”, said Mark
“While these inquiries are an inconvenience to our industry on the one hand, they do provide an opportunity for a more informed discussion on the factors affecting petrol prices in specific markets – and so we welcome the Inquiry”, added Mark
Meanwhile, in Tasmania there some State and Federal politicians have been making spurious statements about petrol prices and advancing outrageous actions in respect of Hobart petrol prices.
One member of the Labor opposition has suggested that Tasmania introduce laws requiring all fuel retailers to disclose their fuel buy price as well as their retail price on fuel rate boards – basically showing market competitors what their gross margins are.
“This is a very dangerous suggestion that could seriously distort market competition and actually increased average fuel prices for Tasmanian motorists”, said Mark.
Late this week, a federal Nationals MP issued a media release and launched a petition calling for a Royal Commission into fuel prices.
While such a call is perhaps understandable in the face of the current popularity of Royal Commissions, the fuel industry is already subject to a level of scrutiny higher than any other industry in the country due to continuous ACCC oversight and public reporting – such as the report released by the ACCC earlier this week.
That is to say nothing of the extensive transparency of fuel retail prices now operating because of industry and State/Territory government initiatives that make petrol prices as visible in the digital space as they are in the physical space.
And today, to top it all off, one of Australia’s notable ex-politicians has launched on attack on the fuel industry claiming that the industry operates on a cartel basis.
Dr Hewson’s criticism appeared somewhat confused as it simultaneously criticises fuel market behaviours, fuel quality standards and links the sale of fuel with the health consequences of tobacco.
Dr Hewson’s attack is extraordinary. It demonstrates a complaint lack of understanding of the metropolitan petrol price cycle, the operation of national fuel quality standards and the structure of competition in the Australian fuel retail industry.
“To describe a market that comprises more than 2000 businesses – many of them small and medium – making independent decisions about retail prices, as being an ‘oil cartel’ is absurd in the extreme”, said Mark.
All of these political interventions over the past fortnight beg a question about the sincerity of public statements being made by politicians at present – all coming in the lead up to a federal election where the two major parties are clambering over each other to demonstrate that they are the champions of addressing rising living costs.
“It is telling to contrast the key messages of the latest ACCC report with the political actions cited above”.
“I really wonder whether any of these politicians have taken the time to read even one of the 38 comprehensive petrol market reports that have been produced in the last 10 years”, said Mark
Perhaps the most favourable assessment of these latest political activities would be that some politicians simply haven’t been following petrol price movements closely enough and are still working with information relating to the high prices experienced in Australia nearly six months ago.
A more likely assessment, however, is that some politicians are comfortable advancing arguments based on the selective use of facts to raise their political profile on an issue that always grabs a media headline.
Perhaps it is time for politicians to be more responsible with their commentary and recognise that our industry is one that operates with a high level of market transparency, employs more than 70,000 Australians and operates with assets valued in excess of $29B.
“It is incumbent on all of our political leaders to advance positions based on fact in a manner that minimises the risk of unintended adverse economic consequences for all Australians that will likely flow from ill-conceived political and legislative actions”, concluded Mark
“For its part, ACAPMA will continue to promote an increased understanding of the relatively complex market in which we operate and make ourselves available for politicians who are genuinely seeking to understand the characteristics of our market”, concluded Mark